Whether you call them trailers, mobile homes, or more accurately, manufactured homes, they're worth incorporating into your real estate investing plan.

Manufactured homes are the most affordable type of housing available and there is a tremendous demand for affordable housing in the United States today. Consider that in December 2004, the median price of a site-built home was $187,000 and the median price of a new manufactured home was $50,000. With stricter building codes and new technologies, the quality of manufactured housing continues to improve.

For the investor, manufactured homes generate the highest cash flow of almost any investment. The reason is logical: the market rents for manufactured homes are only slightly lower than for comparable site-built homes, but manufactured homes cost substantially less to buy.

Let's clarify the terms of this business. Though mobile home and manufactured home are often used interchangeably and both refer to factory-built housing units, mobile homes are mobile housing units built before June 15, 1976 and manufactured homes are mobile homes built after that date. Though most mobile and manufactured homes are technically mobile because they have wheels and can be moved, the majority of them are installed on a site and never relocated.

Mobile homes can be located in parks or on private land. In parks, homeowners typically lease their lots from the park owner, who sets rules and regulations for the park, maintains the common areas, and may offer various amenities. In most cases, when a mobile home is located on private land, the owner of the home also owns the land.

If you are not familiar with the mobile home market and have some negative preconceived notions about it, let's deal with those right now. Yes, there are mobile home parks out there that fit the negative stereotypes you may have heard with problematic occupants and run-down facilities. But there are substantially more middle-income families and retirees choosing to live in manufactured homes, and these are people who take pride in and care of their homes and neighborhoods. Manufactured homes have never been more respectable and desirable than they are today, and that trend is likely to continue as on-site building costs continue to rise.

Finding and Investing in Manufactured Homes

The opportunities for mobile/manufactured home investing are greatest in younger, smaller cities, the suburbs, and rural areas. While you're not likely to find mobile homes in New York City or downtown Boston, chances are you won't have to go too far out to find a market for this type of affordable housing.

Study your market and test the waters by buying a few units. Look for pre-owned homes that might need a little fix-up; they can be bought for a fraction of the cost of a comparable new unit. Once you're familiar with this aspect of real estate investing, consider moving up to park ownership.

If you're interested in multi-unit residential, manufactured home parks are a great alternative to small and even medium-sized apartment buildings. Not all parks are created equal. They vary tremendously in size and amenities. The three basic types of parks are family, retirement, and RV parks.

Family parks allow tenants of any age and are the easiest to find tenants for. However, they tend to have greater tenant turnover and are more management-intensive. The over-55 retirement communities have lower tenant turnover and are easier to manage, but it's more difficult to find tenants because of the age restrictions. RV parks have the greatest turnover with large seasonal variations and high management intensity. Unless your location is superior, this type of park is the most difficult to find tenants for.

One strategy for investing in mobile home parks is to buy a park with a high vacancy rate, great income potential, and poor management. Get the management straightened out, fix up the park, and fill vacant units. Then put the park on the market at its new value and make a quick profit. Or keep the park and enjoy its increased income.

Essentially any proven real estate investment strategy (wholesale, foreclosure, lease option, and so on) will work as well with manufactured homes as it does with site-built homes and will usually generate greater cash flow. Because manufactured homes cost less to buy, they are great opportunities for a beginner without much cash even as they are tremendously attractive to seasoned investors who want strong returns. Chances are, they're perfect for your own wealth-building plan.

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